Matching supply of and demand for skills: International perspectives

Skills for the future, changing employment patterns and their intersection with the vocational education and training sector was the broad research area investigated by a consortium of researchers from the National Institute of Labour Studies, Flinders University, and the Centre for Post-compulsory Education and Lifelong Learning, University of Melbourne. Included in the suite was an investigation by Jack Keating into what some other countries—Singapore, China, the United Kingdom, Norway and Germany—are doing to match the supply of skills with current and projected skill needs.

Keating’s investigation found that Australia’s vocational education and training (VET) system is held in high regard, with many elements copied by other countries. And while comparisons are difficult to make because of the strong influence of historical, cultural and political contexts on national training systems, getting an international perspective can help in considering how to tackle weaknesses in national systems, including Australia’s.

Key messages

• Most countries recognise that investments in:
• • high-level skills are an effective contribution to productivity
  • low-level skills reduce social inequities
  • intermediate-level skills address unemployment
  • school-level VET means lowest opportunity costs.
    
    
• The key variable in national training systems and the associated mechanisms for the planning of training is the degree of autonomy of civil society, in particular industry from government.

• Most Organisation for Economic Cooperation and Development (OECD) countries have major issues regarding the ageing of the workforce, making adult training and lifelong learning key policy areas. This, and regional economic patterns, have also led to the encouragement of labour mobility and an increased demand for migrant workers.

• Australian secondary education is more generalised than almost all OECD secondary school systems. Its relative absence from the VET planning processes is therefore atypical.

• Comparisons between the international and the Australian VET sectors reveal that one of the Australian system’s major strengths is a highly integrated model of national skill standards and a national framework for the awarding of qualifications.

• Weaknesses include the fact that industry-based planning processes are confined to the VET sector and that there is only a limited impact of market principles across the sector.

For a synthesis of the entire research program see A well-skilled future by Sue Richardson and Richard Teese.

Tom Karmel
Managing Director, NCVER

This report is a component of a research program entitled A well-skilled future: Tailoring VET to the emerging labour market. This research program examines the evolving labour market and changing work organisation and management in the context of the vocational education and training (VET) sector and its role in the development of the appropriate levels, types and quantities of skills required to satisfy the future demands of Australian industry. The research reports have been produced by researchers from the National Institute of Labour Studies, Flinders University, and the Centre for Post-compulsory Education and Lifelong Learning of the University of Melbourne.

The report attempts to examine the methods used in other countries to plan or steer the supply of skills to meet current and future skill needs of industry, and to use this overview to reflect upon the methods used in Australia. This is a challenging exercise, given the wide range of methods that are employed by different countries. The complexity is increased by the diversity and variety of other demands and influences upon the skills-formation systems of individual countries. Furthermore, the development of industry skills occurs through the formal education and training system, work practices and experiences, and informal learning in a wide range of settings. Therefore, the report concentrates upon those elements of the formal education and training systems that are designed most directly to meet industry skills needs, namely, the vocational education and training sector.

Many countries have recently been implementing a number of measures designed to better align the supply of training with the demand for skills, such as the recognition of informal learning, national qualifications frameworks and competency-based approaches. These developments have dominated much of the recent VET reports and other literature from countries and international agencies such as the Organisation for Economic Cooperation and Development (OECD) and the European Union. However, as Australia has been at the forefront of most of these developments, they are not considered in this report.

This issue of meeting skills needs is located in a market that has three main sets of actors: employers, current and future workers, and government and its agencies. In an ideal context, the market should balance supply and demand, with employers and workers investing in skills to the level that meets their respective needs as judged by the respective returns of productivity gains and wage increases. However, training markets are imperfect, as training systems are subject to other demands and interventions, and productivity and wage levels are also influenced by other factors. Therefore, virtually all countries have some form of government intervention, frequently in conjunction with industry partners, in their national training or skills development systems.
Broadly, the mechanisms used can be located within three sets of strategies:

• state planning and associated interventions

• the use of the key elements of ‘civil society’, which in most cases are industry and employers, or in the case of European countries, the ‘social partners’

• the market.

All countries use a mixture of these strategies and they typically implement them through a number of mechanisms, which include:

• government agencies, such as training authorities, and employer-led councils or boards at national and regional level, with various degrees of authority to regulate and allocate public training funds

• national, regional and industry sectoral agencies, which typically are responsible for setting industry skills standards, and other advisory and quasi-regulatory roles

• incentives for individuals and enterprises, such as individual learning accounts that encourage investment in training, taxation incentives for individuals and enterprises, and training levies on enterprises

• information and intelligence on future skills needs and shortages at national and regional level, which are gathered and analysed by central or regional agencies

• innovations in funding systems which allow decisions about the type, timing and location of training away from the providers

• qualifications systems that are designed to influence investment in training by individuals and enterprises.

The report has attempted to construct VET system types through the selection of five different countries. The five models are:

• Central planning model: the example of Singapore tends to defy a general trend against central economic and social planning of the past two decades. It is an interesting example of a country that is moving towards a concentration on high skills.

• High involvement and devolved model: Norway is a typical example of the social partnership model of Northern Europe and of the strong presence of vocational training in the schools sector. It also has a high degree of devolution of the responsibility for VET to regional levels.

• Social and economic integration model: the huge investment in intermediate skills development of the famed German Dual System has faced major pressures over the past two decades and raised major policy challenges.

• Mixed model: England has employed a highly complex and dynamic mixture of market-based approaches and multiple planning agencies.

• Institutional but market-based model: The dynamic manufacturing-based economy of the Chinese province of Guangdong is producing a huge demand for intermediate skills.

These different types are all the products of particular national histories, economies and social and political cultures. Thus the applicability of particular overseas approaches to the Australian context is limited, and the report argues that the key variable that influences the intrinsic characteristics of types is the degree of autonomy of civil society from government across each of the countries. Thus, many of the mechanisms employed across the different types would be inappropriate in Australia.

Each of the types or sets of approaches has its own strengths and weaknesses. When these are compared with the Australian approach, there are also some observable strengths and weakness of the Australian model.

Some strengths appear to be:

• the highly integrated model of national skill standards and a national framework for the awarding of qualifications

• strong formal industry leadership and a focus upon the workplace for training standards

• detailed and integrated planning framework at national, state and territory and regional levels

• innovation in some areas, such as recognition of skills and the composition of training qualifications.

Some weaknesses or potential weaknesses are:

• the limiting of the industry-based planning processes to the VET sector and its isolation from the schools and higher education sectors. As a consequence, the responsibility for skills shortages within current debates appears to be directed mostly towards the VET sector

• a lack of diversity within the VET sector, with the dominance of large technical and further education (TAFE) institutes/colleges with significant regional responsibilities for multiple client groups. There may be a weak capacity of the Australian system to respond to the need for high-order industry skills needs in the future

• potential limitations in the capacity of the formal VET sector to be demand-responsive and innovative

• the limited impact of market principles and mechanisms across the VET sector.

This study has not attempted to compare the relative effectiveness of VET systems in other countries with that in Australia. Indeed, strengths and weaknesses have been placed in the historical and current social, economic, geographic and political contexts. The Australian VET sector in its approach to meeting skill needs has many strengths and has been much copied by other countries. However, there are tensions, some of which are likely to increase. Comparisons with approaches and developments in other countries can provide some capacity to look over the horizon to foresee these issues more clearly and to consider possible responses.